by James Brumley | June 14, 2012 10:01 am
Kudos to JPMorgan Chase (NYSE:JPM) CEO Janie Dimon for apologizing over the $2 billion trading loss his company suffered last quarter. Granted, it took a congressional inquiry to squeeze it out of him, but we got it.
We also got a seemingly more genuine apology from General Motors (NYSE:GM) CEO Dan Akerson this week — not at political gunpoint — for the stock’s performance since coming public in 2010.
Hopefully, these gestures will prod some other chief executive officers to do the same.
With that in mind, here’s a look at five more CEOs who owe investors an apology (though investors shouldn’t hold their breath waiting for it):
Spending more money than a company has a realistic shot at pulling back in isn’t a sin. It’s reckless, but investors can forgive mistakes. What makes investors angry is making the same mistake over and over again, and, rather than becoming reticent as time moves forward, doubling down each time an opportunity arises to halt the mistake cycle.
Aubrey McClendon’s mistake? Continuing to assume the price of natural gas would rise when nearly everyone else in the world recognized the severity of the supply glut. The bill he incurred stemming from his optimism has left Chesapeake Energy (NYSE:CHK) about $10 billion in debt, much of which he can only repay by selling off pieces of the company (which might end up exacerbating the problem). Even worse, it has been discovered that McClendon was running an energy hedge fund while manning the helm at Chesapeake. Care for a side of conflict of interest along with the stock’s 75% slide since 2008’s peak?
Technically speaking, McClendon is no longer the chairman thanks to all the missteps, but he’s still the CEO, with all the rights, duties and privileges thereof.
Just to be clear, Scott Thompson no longer is the CEO of Yahoo! (NASDAQ:YHOO). His four-month stint is one of the shortest CEO careers on record. As a former CEO, though, he still should consider saying sorry, given the embarrassing (and nearly needless) reason for his resignation.
The gaffe was a resume scandal, which turned out to be more than a typo or misunderstanding. Thompson knowingly and willingly stated he had earned a bachelor’s degree in computer science from Stonehill College. But he didn’t. His degree is in accounting and business administration.
The irony? It probably wouldn’t have mattered whether he had a computer science degree or not. Most investors probably don’t expect a company’s CEO to actually do any computer programming. It’s the principle of the matter — to everyone except Thompson.
Ballmer’s apology actually should be double-barreled, if not triple-barreled.
His first apology should be to Microsoft (NASDAQ:MSFT) shareholders, who have seen the stock’s price (literally) go nowhere since for 11 years after he took over as head of the company in 2000. Not that new challenges haven’t popped up — like the iPhone, cloud-based office software, digital music, tablets and more — but Microsoft hasn’t done particularly well on any of those fronts.
He also might want to apologize to a handful of hardware companies too, not to mention consumers. How’s that? Although all consumers are a little resistant to change, up through Windows XP (which was largely developed under Bill Gates’ leadership), the new PC operating systems worked, and were broadly regarded as better than their predecessors. Every version of the Windows OS since then has frequently been seen as less desirable than the previous — so much so that users are explicitly looking for a way to avoid the upgrade, including avoiding buying a new computer. It’s the last thing struggling PC manufacturers like Dell (NASDAQ:DELL) or Hewlett-Packard (NYSE:HPQ) needed working against them.
You have to love a willingness to stick with the girl you brought to the dance, but at the end of the day, investors don’t want to go down with a sinking ship.
Eastman Kodak (PINK:EKDKQ) was built as a camera film company, and a good one. Beginning in 2001, though, the business started to fundamentally change when digital cameras became common and photo printers followed in those footsteps. Consumers needed film less and less as the migration to at-home photography began.
Though it’s unfair to say that Eastman-Kodak missed the boat — it actually was one of the first major names to sell digital cameras and photo printers — it would be totally fair to say it didn’t even come close to staying ahead of the digital curve. Now it’s so far behind in that market, it might never catch up … and that’s assuming it manages to come out of bankruptcy relatively intact. The company announced earlier this year it would be getting out of the digital camera business, and its digital imaging patent portfolio — perhaps the last thing of value the company owns — is up for sale.
No, McKesson (NYSE:MCK) hasn’t cued up any ethics scandals, and nobody on the company’s management team is involved in an illicit affair either. By and large, everything looks above board and morally acceptable with the organization.
When you take a closer look at who’s earning what, though — in this case, the $131 million Hammergren earned between his salary, bonus and stock options — one has to wonder if he really deserves to be America’s highest-paid CEO.
And it wasn’t a one-time paycheck, either. Hammergren also was 2010’s top-paid CEO, putting $145 million in his bank account that year.
Is he worth it? He’s good, to be sure, but just for perspective, the company earned a profit of $1.4 billion last year. The CEO is taking home one-tenth of the company’s total earnings for himself, which is nothing less than insane — even by the new-normal standards of excess running rampant across the nation.
Now, for a few notable omissions, and why they’re excused:
Wondering where Andrew Mason of Groupon (NASDAQ:GRPN), Mark Zuckerberg of Facebook (NASDAQ:FB) and Reed Hastings of Netflix (NASDSAQ:NFLX) are? Don’t. Not that any of the trio are fault-free, and not that their stocks’ share prices aren’t in trouble, but none of these individuals has done something they should have known not to do (or at least could have prevented).
In the case of Zuckerberg and Mason, the missteps are largely attributable to their youth and a lack of appreciation for the fact that shareholders become your customer when you’re running a publicly traded company. And, though neither Groupon nor Facebook are smashing successes yet, it’s not arrogance, ethics problems or excessive pay getting in the way. Both companies are simply now at the point where they need to be effectively monetized, and their founders might not be the right people for that particular job.
As for Reed Hastings and Netflix, perhaps he was too optimistic he’d be able to develop a great business model that others wouldn’t copy. But he still turned a great idea into a viable business category. Now it’s all about finding the right balance between his cost and customer fees. He’s not found it yet, but the premise clearly works.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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